Asia Market Update: RBA Gov Lowe next move will be higher; China remains committed to increasing regulations; Equities gain as risk-on continues
***Headlines/Economic Data***
- General Themes: Asian equity markets trade broadly higher, after US gains. MSCI Asia Pacific Index on track for record close
-Best performing sectors include Energy and Materials
Japan
-Nikkei 225 opened +0.8%, closed +0.5%
-Continued strength in Auto (Toyota +1%, Honda +0.5%) and Steel sectors (Nippon Steel +0.8%, JFE Steel +2%, tracks 1.1% gain in shares of US Steel).
-Financials add on to Tuesday’s gains: Mega Banks (MUFJ +1.9%, Mizuho +0.6%, SMFG +1%)
-Nippon Paint halted following merger speculation related to Axalta Coating Systems.
- (JP) Japan plans to reduce its annual float of 30-yr and 40-yr bonds for the first time ever FY18 due to low rates sapping demand – Nikkei; The possible reduction may be discussed at the Finance Ministry's meeting of bond market participants which is expected to be held later today.
- Bank of Japan (BOJ) said to be hinting that it could move away from crisis mode stimulus earlier than expect through a future hike in its yield target - financial press
- (JP) Japan govt said to plan FY17/18 extra budget of ¥2.0-2.5T - Japanese press
- (JP) Japan govt said to be again leaning towards cutting CPI and GDP estimates in next mid-term report - financial press
- Looking Ahead: Tokyo Stock Exchange to close on Thursday in observance of Labour Thanksgiving Day
Korea
-Kospi opened +0.6%; Samsung Electronics +1%, Hynix +2% (tracks US chip sector gains)
-Brokerage firms track gains in equity market
-Lotte Shopping -4% (share placement)
- USD/KRW (KR) South Korea FX Official: KRW gain pace faster than other currencies; KRW hit 2.5 year high in the session, analyst expect this downward trend to continue for the time being but the pace will probably be controlled
- (KR) UN Command: North Korea violated Korean War armistice last week when it fired on defecting soldier at demilitarized zone
- South Korea FX Official: KRW gain pace faster than other currencies
-South Korea Q3 Household Credit (KRW): 1.42T v 1.39T prior; Household Debt y/y: 9.5% v 10.4% prior
China/Hong Kong
-Shanghai Composite opened +0.2%, Hang Seng +0.9% (hit 10-year high above 30,0000)
-Hang Seng Materials Index +2.4%, Energy Index +1.5%, Financials Index +1.2%
-Hang Seng Property/Construction Index +1%; China to give priority to reducing property bubble – Xinhua
- China offshore yuan (CNH) +0.2%
- (CN) China PBOC Gov Zhou: Will reduce currency intervention to advance yuan internationalization; to strengthen policy coordination between central and local financial regulators. Reiterates calls for preventing systemic financial risks
- (CN) China Ministry of Housing and Urban-Rural Development, the Ministry of Land Resources and PBOC in a joint meeting stressed regulations to curb property sector risks must not be relaxed
- (CN) China National Development and Reform Commission (NDRC) target to cut coal capacity by 500Mt in 2016 within 3-5 years will most likely be met ahead of schedule
-China Q3 overseas real estate investments $2.5B, -51% y/y (lowest level since Q4 2013)
-Chinese airlines trade generally higher: Air China +11.5%, China Southern Airlines +10.5%, China Eastern Airlines +9.5%
-China Southern Airlines President the company is planning to use American Airlines ties to ‘beef up’ US routes
-China Securities Regulatory Commission (CSRC) Chairman Liu Shiyu: creating a new committee to oversee a powerful panel that reviews stock-issuance applications
-Weichai Power +4% (fuel cell agreement with Robert Bosch; Chow Tai Fook Jewellery Group +5.5% (H1 profits +44% y/y)
- Geopolitics: US Treasury sanctions 4 China companies and 1 citizen for North Korea ties
-Air China says to suspend flights to Beijing from Pyongyang, North Korea as the operation is ‘unsatisfying.’
-Fixed Income: Chinese corporates continue to tap USD bond market (Shenzhen International, Times Property Holdings, China State Construction)
- (CN) PBoC OMO: Injects CNY190B v CNY180B injected in 7,14 and 63-day reverse repos prior; Net injects CNY0B v CNY10B prior
- USD/CNY (CN) PBoC sets yuan reference rate at 6.6290 v 6.6356 prior
- (CN) China to sell CNY7B in 'Dim Sum' Bond in Hong Kong during week of Nov 27th
-China MoF sells 3-year bonds: avg yield 3.7365% v 3.74%e
- (HK) Offshore yuan 1-day HIBOR +3.4ppts to 5.97968%; 1-week +1.76ppts to 4.99478%; 1-month +64bps to 4.50467%
Australia/New Zealand
-ASX 200 opened +0.3%; ASX 200 Energy index +1.1% (oil prices +1.8% on Tuesday), Resources Index +1.1% (copper prices +1.2% on Tuesday)
-ASX 200 Financials Index +0.1%: (AU) Australia PM Turnbull said to be planning to discuss reversing opposition to an inquiry into misconduct in banking sector - UK press
-ASX 200 Utilities -0.5%, tracks underperformance in S&P 500 Utilities Sector
-AUD trades higher then pares gains, amid recent comments from RBA Gov Lowe and better than expected Q3 construction work done data.
- AUSTRALIA Q3 CONSTRUCTION WORK DONE Q/Q: 15.7% V -2.3%E; -Building construction work done -0.4% q/q, Engineering construction work done +33.0% q/q
-Australia 10-year bond yield -2bps (US Treasury yield ended down on Tuesday)
-WebJet -10% (FY18 outlook, restructuring measures)
- (NZ) Reserve Bank of New Zealand (RBNZ): Developing strategic plans for future currency issues, to consider feasibility of alternative digital currency
- (AU) Australia sells A$900M vs A$900M indicated in 2.25% May 2028 bonds, avg yield 2.5746%
- (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: -3.4% v -3.5% prior; Avg winning auction price: $2,970 vs. $3,105 prior
-Looking Ahead: New Zealand Q3 retail sales due on Thursday
Other Asia
Malaysia:
-Ringgit (MYR) gains over 0.3% amid equity flows and higher oil prices
-Malaysia’s Government postpones today’s release of Oct CPI data to Nov 24th (no reason initially cited)
-Malaysia sells MYR2.0B in 2033 Bonds: avg yield 4.55%, bid to cover 3.81x
Taiwan
-Taiex opened +0.3%
-UMC +3.5%: 2018 silicon wafer prices may increase by 25-35% amid higher demand, says Taiwanese press report
-Taiwan Dollar (TWD) trades at strongest level since early Sept
North America
- Fed Speak: Fed Chair Yellen: Must keep an open mind and not be trapped by forecast; Some hint inflation expectations may be drifting down; Don't think expectations have drifted down very much - speaking in New York
-US equities ended broadly higher: Nasdaq +1.1%, Russell 2000 +1%, S&P 500 +0.7%, Dow Jones +0.7%
-Outperforming sectors on S&P 500: Technology +1.1%,Healthcare +0.9%
- (US) Weekly API Oil Inventories: Crude: -6.4M v +6.5M prior
-After Market Movers: Gamestop(GME) Reports Q3 $0.54 v $0.43e, Rev $1.99B v $1.96Be; +8.8% afterhours ; Guess (GES) Reports Q3 $0.12 v $0.11e, Rev $554M v $566Me; -11.1% afterhours, Hewlett Packard Enterprise (HPE) Reports Q4 $0.29 v $0.28e, Rev $7.70B v $7.71Be; Antonio Neri to succeed Meg Whitman as CEO; -7.2% afterhours; HP Inc (HPQ) Reports Q4 $0.44 v $0.44e, Rev $13.9B v $13.2Be; -5.8% afterhours , Salesforce.com (CRM) Reports Q3 $0.39 v $0.37e, Rev $2.68B v $2.65Be; -1.4% afterhours
M&A: Japan’s Nippon Paint declined comment on speculation that it could bid for Axalta Coating Systems.
-Key Safety Systems to pay $1.59B to acquire substantially all of Japan Takata’s assets
-Shares of Pepsi rose during NY session on speculation of possible interest from Kraft Heinz
Politics: US Special Prosecutor Mueller said to be investigating Kushner contact with foreign leaders before President Trump's inauguration - financial press
Tax Reform: (US) Sen Murkowski (R-AK): To support Obamacare mandate repeal in tax bill - press
Trade: (US) USTR Lighthizer: Remains concerned about the lack of headway made at the NAFTA talks; Seeks meaningful progress before end of the year; Says seen no evidence Canada and Mexico are willing to seriously engage on US demands.
- Mexico Econ Min Guajardo: Mexico is seriously committed to NAFTA negotiation; Can consider trade rebalance only via expansion.
- NAFTA round six discussions in Montreal scheduled for Jan 23-28 - press
Europe
- (EU) ECB's Coeure (France): Expects change in monetary policy outlook soon, expected to occur by Sept of 2018 - Handelsblatt
- (DE) Supporters of Chancellor Merkel reportedly anticipate grand coalition with SPD to end political impasse – press
- (DE) Germany Free Democratic Party (FDP) spokesperson: we won't re-enter coalition govt talks - press
- (UK) British and EU negotiators reportedly are targeting Brexit divorce deal within three weeks – FT
- (EU) Smaller companies in the UK plan to cut use of euro for settling international payments by 7.8% in the next 6 months – East & Partners Pty Study
- (EU) Some EU countries reportedly are balking at plans to boost taxes on tech multinationals – press
-Dutch Telecom Altice SA said to have held talks with banks over tower sale plans (press)
-AkzoNobel ends merger talks with Axalta Coating Systems.
Looking ahead: Upcoming UK Autumn Budget Statement in focus
***Levels as of 01:00ET***
- Nikkei +0.5%, Hang Seng +0.6%; Shanghai Composite +0.1%; ASX200 +0.4%, Kospi +0.3%
- Equity Futures: S&P500 +0.0%; Nasdaq100 +0.0%, Dax +0.1%; FTSE100 +0.1%
- EUR 1.1748-1.1733; JPY 112.50-112.16; AUD 0.7595-0.7562;NZD 0.6854-0.6825
- Dec Gold +0.0% at $1,281/oz; Jan Crude Oil +1.5% at $57.70/brl; Dec Copper -0.0% at $3.13/lb